Indian microfinance institutions (MFIs), which have seen new lending from commercial banks dry up since the “Andhra Pradesh crisis” broke in late 2010, instead have been accessing funds from social and philanthropic investors including: International Finance Corporation (IFC), the private-investment arm of the World Bank Group; ACCION International, a US-based nonprofit organization; MicroVest Capital Management, a US-based family of microfinance investment funds; Shore Capital, a UK-based investment banking company; Aavishkaar Goodwell India Microfinance Development Company Limited, an India-based financing company; and BlueOrchard Microfinance Investment Managers, a Swiss manager of microfinance funds.
Arun Kumar, founder of Indian MFI Svasti Microfinance, is quoted as saying, “The reason we are seeing greater support from social funds is that they are not entirely profit oriented. However, you still have to convince them that you have a solid and unique business model.” According to The Times of India, a national newspaper, Svasti Microfinance is joined by several MFIs that have received funding from private investors, including Ujjivan Financial Services, Bandhan Financial Services Private Limited, Rashtriya Grameen Vikas Nidhi, ESAF Microfinance and Saija Finance Private Limited.
The details of several of these transactions have been covered in the MicroCapital stories listed below.
By Rohan Trivedi, Research Associate
About International Finance Corporation (IFC):
A member of the World Bank Group, the International Finance Corporation (IFC) offers loans, equity investments, advisory services and technical assistance to private companies with the intent of alleviating poverty and promoting open and competitive markets in developing countries. As of 2011, IFC has 182 member countries that drive its policies and approve disbursements. As of June 30, 2010, IFC reports net income of USD 1.75 billion, total assets of USD 61 billion, return on assets of 3.1 percent and total investment mobilization of USD 18.4 billion to 528 projects.
About ACCION International:
ACCION International is a private, US-based nonprofit organization with the mission of alleviating poverty by providing financial products such as microenterprise loans and business training to its clients. ACCION was founded in 1961 and issued its first microloan in 1973 in Brazil. ACCION’s partner microfinance institutions provide loans to men and women entrepreneurs in 22 countries in Latin America, Asia, Africa and the United States. As of 2010, ACCION’s network serves 3.18 million active clients and has an active loan portfolio of USD 3.81 billion.
About MicroVest Capital Management:
Launched in 2004 with USD 15 million in capital, MicroVest is a family of funds that invest in microfinance institutions (MFIs) in emerging markets. MicroVest is headquartered in Washington, DC, and was founded by three nonprofit organizations: CARE International, a US-based humanitarian agency; Seed Capital Development Fund Limited, a US-based charity that promotes economic development through microfinance; and Mennonite Economic Development Associates, a Canadian organization that provides financial and technical assistance to microentrepreneurs. As of June 2010, MicroVest reported supported MFIs that together hold a gross loan portfolio of USD 3.1 billion.
About Shore Capital:
Shore Capital is a UK-based financial group that offers investment banking services. Shore Capital specializes in equity capital markets, alternative asset management and principal finance. As of December 31, 2010, Shore Capital reported total assets of GBP 137 million (USD 211 million).
About Aavishkaar Goodwell India Microfinance Development Company Limited:
Aavishkaar Goodwell is an Indian-Dutch joint venture that provides equity finance and technical assistance to the Indian microfinance sector. The investment team in India invests alongside the team that manages Aavishkaar India Micro Venture Capital Fund. The Dutch microfinance private equity company Goodwell Microfinance Development Company is the leading investor in Aavishkaar Goodwell, along with development financial institutions and commercial banks including the Netherlands Development Finance Company (FMO), the International Finance Corporation (IFC) and Deutsche Bank. Aavishkaar Goodwell is building a portfolio of USD 25 million in 30-40 microfinance start-ups and 8-10 fast growing institutions. For microfinance start-ups, Aavishkaar Goodwell partners with Intellecap, an Indian “social-sector advisory firm.”
About BlueOrchard Microfinance Investment Managers:
BlueOrchard Microfinance Investment Managers is a Swiss-based manager of microfinance funds. It is composed of two companies: BlueOrchard Finance SA, which since 2001 has provided credit to microfinance institutions (MFIs), and BlueOrchard Investments Sàrl, which since 2007 has invested in the equity of MFIs and network funds. As of December 31, 2009, BlueOrchard reported USD 895 million in assets under management and a microfinance portfolio of USD 71 million.
Sources and Additional Resources:
[1] The Times of India: “Social funds prop up cash-starved MFIs”, http://articles.timesofindia.indiatimes.com/2011-06-21/india-business/29682828_1_microfinance-institutions-sks-microfinance-ujjivan
MicroCapital.org story, June 17, 2010: “MICROCAPITAL BRIEF: Wholesale Lenders Agree to Restructure $1b in Debt for Indian Microfinance Institutions (MFIs) Spandana Sphoorty, Asmitha, Future, Share, Trident”, https://www.microcapital.org/microcapital-brief-wholesale-lenders-agree-to-restructure-1b-in-debt-for-indian-microfinance-institutions-mfis-spandana-sphoorty-asmitha-future-share-trident/
MicroCapital.org story, May 24, 2011: “MICROCAPITAL BRIEF: IFMR Capital Structures $3.8m Securitization of Microfinance Loans Originated by Ujjivan Financial Services of India”, https://www.microcapital.org/microcapital-brief-ifmr-capital-structures-3-8m-securitization-of-microfinance-loans-originated-by-ujjivan-financial-services-of-india/
MicroCapital.org story, May 23, 2011: “MICROCAPITAL BRIEF: To Counter Liquidity Crunch in India, Grameen Koota, Bandhan, SKS Securitize Loans Disbursed to Women”, https://www.microcapital.org/microcapital-brief-to-counter-liquidity-crunch-in-india-grameen-koota-bandhan-sks-securitize-loans-disbursed-to-women/
MicroCapital.org story, May 11, 2011: “MICROCAPITAL BRIEF: BlueOrchard Invests $1m in Svasti Microfinance Private Limited of India”, https://www.microcapital.org/microcapital-brief-blueorchard-invests-1m-in-svasti-microfinance-private-limited-of-india/
MicroCapital.org story, January 27, 2011: “MICROCAPITAL BRIEF: International Finance Corporation (IFC) Invests $35m in Equity of Indian Microfinance Institution (MFI) Bandhan Financial Services”, https://www.microcapital.org/microcapital-brief-international-finance-corporation-ifc-invests-35m-in-equity-of-indian-microfinance-institution-mfi-bandhan-financial-services/
MicroCapital Universe Profile: International Finance Corporation (IFC), https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=International+Finance+Corporation+%28IFC%29
MicroCapital Universe Profile: ACCION International, https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=ACCION+International
MicroCapital Universe Profile: MicroVest Capital Management, https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=MicroVest+Capital+Management
MicroCapital Universe Profile: Shore Capital, https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=Shore+Capital
MicroCapital Universe Profile: Aavishkaar Goodwell India Microfinance Development Company Limited, https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=Aavishkaar+Goodwell+India+Microfinance+Development+Company+Ltd
MicroCapital Universe Profile: BlueOrchard Microfinance Investment Managers, https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=Blue+Orchard+Microfinance+Investment+Managers
Browse the MicroCapital Universe and add your entry to the wiki at https://www.microcapital.org/microfinanceuniverse/
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